Mobile bidding may damage consumers warns Telefonica

Telefonica drops out of 3G auction citing excessive bidding

The latest telecommunications company to withdraw from the bidding for third generation (3G) UMTS mobile phone licences, Telefonica, has warned that sky-high bidding may leave consumers with a raw deal.

Spanish-based firm Telefonica withdrew from the official bidding Monday and a spokeswoman says that this was because skyrocketed prices would have affected its service. "Telefonica resigned from the bidding because the price got so high," she says. "We thought that if we had to pay that much we would have to make the service very expensive for clients." She adds that the price would also have affected Telefonica's ability to invest in 3G technology.

13 different companies began bidding for the right to operate UMTS (Universal Mobile Telecommunications System) networks in the UK in March. Six now remain; BT, NTL, Orange, One2One, Vodadfone and TIW.

Bidding recently topped £19bn surpassing the expectations of most observers and causing concern among experts that pricing may be getting out of control. 3G licences will allow companies to provide the infrastructure over which broadband wireless Internet services are supplied to future mobile devices.

The government rejects the suggestion that the companies involved in this multi-billion pound auction will offer a lower quality or more expensive service to consumers. A Department of Trade and Industry (DTI) spokesman says, "The incentive will be to roll out the service earlier -- in order to recoup the money. The value is placed on the licences by the companies. They obviously feel that it is commercially viable."

He also claims that the interests of consumers have always been at the forefront of the government's mind during the current bidding war. "Of course the government is concerned about consumers. That is why it brought in the bidding," he says.

Companies are currently bidding for four different types of UMTS licence. A fifth licence is being reserved for a new entrant to the mobile market.

Over twenty billion pounds is currently on the table to buy the five third generation (3G) mobile phone Wireless Technology licences on offer from the British Government. Go to AnchorDesk UK with Tony Westbrook for the news comment.

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